Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 CONFIDENTIAL car CURRENT INTELLIGENCE WEEKLY SUMMARY COPY NO. 18 OCI No. 7756/56 27 December 1956 AUTH Ft ? OAT REVIEWER: NEXT REVIEW DATE; O DECLAS3IFIED CLASS. CHANGED TO: DOCUMENT NO. ...-???=~~ NO CHANGE ICI CLASS. 0 CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE CONFIDENTIAL -gFwQftZffi 25X1 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 13, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 nnnurinrAMTtI I Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 T H E W E E K I N B R I E F OF IMMEDIATE INTEREST NEW SOVIET ECONOMIC PLANNING COMMITTEE . . . . . . . . . Page 1 The communique following the recent plenum of the central committee of the Soviet Communist Party and the restaffing of the State Economic Commission under M.G. Pervukhin suggest that the Khrushchev leadership is still dominant in the USSR. The communique's reiteration of the policies laid down at the 20th party congress and the naming to the economic commission of specialists who have long been serving as part of the Khrushchev-Bulganin team suggest that no change in the top leadership is imminent. An over-all review of the Sixth Five-Year Plan is to be conducted by the specially constituted, high- level planning group. This review apparently signals the beginning of strenuous efforts to adjust Moscow's plans to meet recently increased economic pressures. SUEZ AND SINAI . . . . . . . . . . . . . . . . . . . . . Page 2 The Arab states, apparently convinced that the with- holding of oil from the West has been the tactic which played the biggest role in forcing Britain and France to withdraw from Suez, are now continuing to apply the same pressure to obtain a complete Israeli evacuation of Sinai and the Gaza strip. Israel is showing increasing re- sistance and is in turn asking the Western powers for guarantees before it makes a final decision on the evac- uation question. The British and French, meanwhile, continue to seek a role in the canal clearance operations as a means to retain some on-the-spot leverage. INDONESIA .. . . . . . . . . . . . . . . . . . . . . . . Page The bloodless coup by elements of the Indonesian army in Sumatra is now aimed at forcing the collapse of the government of Premier All Sastroamidjojo. The government's continued existence is jeopardized by the threatened de- fection of a large portion of its political support.. Agitation for the appointment of former vice president Hatta as premier is growing, but there is some doubt whether President Sukarno would agree to such a move. CONFIDENTIAL 25X1 4 THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30 :CIA-RDP79-00927A001100020001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 NOTES AND COMMENTS CABINET CRISIS IN SYRIA . . . . . . . . . . . . . . . . Page 1 Conservative efforts to prevent a complete assumption of power by the leftists have apparently delayed the formation of a new cabinet following the resignation of Prime Minister Asali on 22 December. Pressure on the con- servatives mounted, however, with the announcement of a court-martial of Syrians involved in an alleged Iraqi- sponsored coup. 25X1 GREECE AND TURKEY SHIFTING TACTICS ON CYPRUS ISSUE . . . Page 1 Greece and Turkey appear to be shifting their tactics on the Cyprus problem. Greece will press for an immediate debate in the UN and will probably emphasize "independ- ence" rather than "self-determination." The Turks are now urging partition as the only solution they could tolerate. London intends to retain sovereignty over Cyprus for the foreseeable future and will adhere to its L: _z riots have C h yp t e responded with renewed violence. 25X1 SOVIET ARMS SUPPLY TO AFGHANISTAN . . . . . . . . . . . Page 2 The shipment of Soviet arms--including aircraft-- into Afghanistan in the past several months raises the possibility of an eventual large-scale armed clash nistan ht . oo between Afghanistan and Pakistan over Pus 2G\/1 CHOU EN-LAI ANNOUNCES FORTHCOMING TRIP TO THE USSR . . . Page 4 Soviet relations with the Satellites probably will be a principal topic of discussion during Chou En-lai's trip to Moscow in January. The Chinese have been strongly sympathetic toward Satellite aspirations for a greater degree of freedom within the bloc. Peiping wishes, however, to avoid a public quarrel on the issue, Ch ' s ou and any Sino-Soviet communique emerging from visit would probably acknowledge the necessity for bloc " unity and "proletarian internationalism. SOVIET PROPAGANDISTS STRESS VIGILANCE THEME . . . . Concern over unfavorable tendencies in the political orientation of the Soviet people has prompted Moscow to warn Soviet citizens of the need for greater vigilance against the enemies of the USSR. There are as yet no indications that repressive measures typical of Stalinist Page 5 THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 -Woo SECRET -VANNe vigilance campaigns are being prepared. These demands for watchfulness seem to be primarily an effort to justify the use of force in the Hungarian uprising, which is said to have been instigated by the "reactionary" West. GOMULKA'S POSITION AND PROSPECTS . . . . . . . . . . . . Polish party first secretary Gomulka is faced with an increasingly stronger party opposition and growing popular discontent, The responsibilities of office and the resulting need to balance political realities carefully have forced him to resort to temporizing tactics in an effort to fulfill high popular expectations while at the same time attempting to forestall Russian counteraction. His task is made all the more difficult by the weakening of central authority and the loss of party unity which accompanied his rise to power. HUNGARIAN REGIME SEEKS CO-OPERATION OF PUBLIC . The Hungarian regime, no longer forced to combat violence and general strikes, has stepped up its propa- ganda campaign to convince the overwhelmingly hostile and suspicious population that it is working for the popular welfare and is worthy of popular confidence. Attempting to minimize the terror tactics of the newly constituted security forces and to ignore the presence of Soviet troops, press and radio statements promise daily that life can be better than ever if everyone will now join an all-out effort to rebuild the nation's shattered economy. The Soviet occupation will have to be maintained for the foreseeable future and popular hostility is un- likely to diminish unless major concessions are granted. SECRET Page 6 Page 7 Page 8 THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY EAST GERMAN CRACKDOWN ON INTELLECTUALS AND STUDENTS . . Page 9 The East German regime is making alternate threats and promises to intellectuals and university students while playing on the theme that excesses and misguided actions by these groups were responsible for the anti- Soviet developments in Poland and Hungary. Some intel- lectuals have been arrested and a few university students expelled as a warning to potential dissident elements. Important party and government officials are joining the press and radio campaign to combat the spread of danger- ous ideas;" BOLIVIAN MONETARY PROGRAM MAY PROVOKE CRISIS . . . . . . Page 10 The implementation on 15 December of the Bolivian monetary stabilization program--a basic economic reform bearing heavily on the working classes in its opening phase--has aroused widespread unrest and may bring about the downfall of the administration. Discouraged by the wavering support of labor leaders, moderate President Siles has threatened to resign, and the cabinet reportedly tendered its resignation on 18 December in protest against left-wing political attacks in congress. CHANGING BRITISH ATTITUDES ON CONTACTS WITH USSR . . . . Page 12 Indignation in Britain over recent Soviet actions in Hungary has virtually halted all trade union and student exchange trips to the Soviet Union. The government does not appear, however, to have abandoned its view that exchange visits by individuals and groups offer the principal hope for a long-term improvement in Anglo- Soviet relations. NORTH AFRICA . . . . . . . . . . . . . . . . . . . . . Page 12 In Algeria, Resident Minister Lacoste has been un- able to get the Moslems to participate in his reform plan, and the terrorists have increased their attacks. In Morocco and Tunisia, there are indications of a desire for improved relations with France. 25X1 LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13 The Laotian cabinet on 20 December refused to approve a communique signed by Prime Minister Souvanna Phouma and Pathet Lao chief Souphannouvong calling for the immediate inclusion of Pathet Lao leaders in the cabinet but offering no effective guarantees for the res- toration of the government?s control over the disputed provinces, integration of Pathet forces into the royal army, and dissolution of the Pathet Lao movement. The SECRET THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 cabinet has agreed, however, to accept.two Pathet officials in the cabinet if such guarantees are forthcoming. 25X1 UNREST IN URBAN AREAS OF NORTH VIETNAM . . . . . . . . . Page 14 Violence in North Vietnam has apparently been con- fined to the rural areas, but there is growing evidence that dissatisfaction is also widespread among the urban population. Intellectuals appear to be particularly restive, and Hanoi on 15 December had to suspend publi- cation of a new literary magazine which criticized the Communist regime. The Viet Minh has recently called for 25X1 people's classes." Page 15 SCANDALS PLAGUE RHEE ADMINISTRATION . . . . . . . . . . Page 16 Three scandals, two involving assassinations and one corruption, have lately embarrassed the Rhee admin- istration in South Korea. The handling of the cases suggests that President Rhee is reluctant at this 'time to protect officials guilty of misconduct, and this attitude may presage at least a partial cleanup within h t e,corruption-ridden Liberal Party. INDIAN REACTION TO NEHRU'S VISIT TO UNITED STATES . . . Page 17 The Indian public and press appear pleased with Prime Minister Nehru's reception in the United States and feel that there will be a definite improvement in SECRET V THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 PATTERNS AND PERSPECTIVES THE BALTIC STATES: CHRONIC TROUBLE SPOT FOR USSR . . . Page 1 Lithuanian party boss Antanas Snechkus admitted in mid-December that the Hungarian revolt had encouraged "bourgeois nationalists" in Lithuania to attack the Communist Party. Early in November, anti-Soviet rioters in several cities demanded the withdrawal of Russians from Lithuania, and in December, the local parties ex- pressed concern over student unrest in Latvia and Estonia. Such developments indicate that anti-Communism and re- sistance to Soviet rule are still strong and perhaps growing,16 years after the incorporation of the Baltic CHINESE COMMUNIST AGRICULTURE . . . . . . . . . . . . . Page 4 Communist China probably will not achieve the high targets for agriculture of the Second Five-Year Plan (1958-1962),- unless the regime invests more than is now scheduled. Peiping's planning relies heavily on the farms to produce the surpluses needed to pay for the ambitious industrialization program. To date, the pressure of a growing population on land resources and the unwillingness of the regime to invest heavily in agricultural machinery and fertilizer have made increas-- ingly difficult the realization of such surpluses. SPAIN: INFLATIONARY PRESSURES . . . . . . . . . . . . . Page 8 Spain is threatened by growing inflation as a result of pay raises averaging 40 to 45 percent decreed in November for industrial and agricultural workers. Govern- ment control measures thus far seem inadequate and, should an inflationary spiral develop, the ensuing economic dis- locations and popular unrest could endanger.Franco's position. SECRET vi THE WEEK IN BRIEF Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY OF IMMEDIATE INTEREST The communique on the de- cisions of the recent plenum of the central committee of the Soviet Communist Party and the restaffing of the State Economic Commission under M. G. Pervukhin .suggest that the Khrushchev leadership is still dominant. Khrushchev himself did not figure personally in the public statements emanating from the plenum and there has been, no mention of serious political problems which the meeting may have discussed. The communique's reiteration of the policies .laid down at the 20th party congress and the naming to the planning commission of special- ists who have long been serving as part of the Khrushchev-Bul- ganin team suggest that no dramatic change in the top leadership is imminent. Rise of Pervukhin The appointment of M. G. Pervukhin* as chief of the commission is in line with earlier indications that he has been steadily improving his position over the course of the past two years. In contrast, the planning organi- zation under the former chief, M. Z. Saburov, has been direct- ly criticized by Khrushchev on several occasions. The central committee re- ferred a re-examination of in- ternal economic development policy to a specially consti- tuted, high-level planning group, which apparently will review the Sixth Five-Year Plan draft and submit a re- vised version to the Supreme Soviet during the first half of 1957. The 1957 plan and budget probably will not ap- pear until well into 1957. Thus, the central committee de- cided against making immediate changes in the Soviet Union's economic plans in favor of an over-all review of the Sixth Five-Year Plan. Pressure for modification in the plan has been occasioned by recent changes in the eco- nomic relationships with the Satellites, the maintenance of large military forces, and the leadership's apprehension of potential discontent. In addition, there have been cumu- lative internal maladjustments arising from underfulfillment of plans for production of in- dustrial raw materials and construction materials. Commission Appointees The re-staffed State Econom- ic Commission will apparently review the Sixth Five-Year Plan as well as annual plans. High- ranking officials named to assist Pervukhin represent im- portant aspects of the Soviet economy: First Deputy Chair- men Kosygin and Malyshev, light industry and industrial tech- nology respectively; Deputy Chairmen Khrunichev and Ku- cherenko, armaments and construc- tion. Agricultural experts Matskevitch and Benediktov were also appointed deputies. Although no foreign economic relations specialist was named ckPPILIA PART I OF IMMEDIATE INTEREST Pa.PP 1 of 4 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET "' CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 at this level, such specialists are undoubtedly represented just below these chairmen and deputies. The central committee plenum reaffirmed the policy framework adopted at the 20th party congress within which the planning group should operate. The primacy of heavy industry and the goal of catch- ing up with the West in per capita production in the short- est possible "historical time" were restated. Emphasis was placed on greater decentrali- zation and efficiency to make possible the simultaneous achievement of all goals, while increased functionalism was stressed as necessary for the achievement of industrial con- struction and housing goals. These points have'been fre- quently stressed by Bulganin and Khrushchev. The committee will probably have to devise solutions more far-reaching than these, however,to resolve the difficulties. Prior to the central com- mittee meeting, there were in- dications that the Sixth Five- Year Plan would be modified to provide for significantly in- creased hoi4sing construction, and possibly for stepped-up consumer goods production. The Arab states have in- dicated a growing sense of their bargaining power during the past week. They appear to regard the British and French withdrawal as "their" victory, won by the withholding of oil from the West, and are now try- ing to apply the same tactics The pressure for an in- creased housing program came at a time when it was clear that other elements of the 1956 economic plan would not meet goals. Production goals for coal, metals, cement and timber will not be met, indi- cating a trend which could lead to a strain on the raw material base for industrial expansion. Thus, there was counterpressure to maintain construction ac- tivities serving industry and raw materials extraction. Con- struction was singled out for much discussion in the central committee communiqud, and a remedy for slowing down the rate of new construction starts, while concentrating on projects already under way, was advanced. The central committee's decision to forego an immediate increase in housing and con- sumer good's goals in favor of an over-all review of the plan was accompanied in the report by a note of satisfac- tion with present progress, Output of consumer goods will be more than 9 percent greater than in 1955, and this year's record harvest ensures further significant progress in 1957 to obtain a complete Israeli evacuation of Sinai. Although Egypt apparently has agreed to allow salvage work on the canal to begin, there were signs that Cairo had been strongly tempted to delay the operation. Nasr may well SECRET PART I OF IMMEDIATE T'TTFRERT Dnrpm % ,,-P A Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 still use the threat of new delays to press the West for a commitment on the Israeli withdrawal. Earlier last week the Jordan cabinet announced it would urge that Arab oil remain cut off from the West until Israel gives satifaction. Syrian officials said the pipe- line from Iraq to the Mediter- ranean could only be re-opened promply if the United States would set a terminal date for Israel's occupation of the Gaza strip. The Israelis reacted to this Arab pressure by further glowing down the snail's pace of their withdrawal and by re- peating, with added emphasis, their statements of determina- tion to keep Egypt from return- ing to the Gaza strip, Prime Minister Ben-Gurion has said his government must-settle its policy on this issue by early January, when Israeli troops will have withdrawn as far as El Arish, the last town west of the Egyptian-Israeli border in Sinai, and to a belt of territory along the Gulf of Aqaba. The British and French, following their evacuation on 22 December, have continued to press the UN for maximum Al- lied participation in the canal clearance operations, with "adequate safeguards" for their crews. General Wheeler, the lo- cal head of the UN. salvage opera- tion, reportedly has contracted for two British and one French, as well as four German vessels, London and Paris are seeking by this means to avoid being completely excluded from Egypt and to maintain some on-the-spot influence. Two top aides of UN secretary general Hammarskjold were scheduled to arrive in. Cairo on 27 December for further talks on clearance problems. In what appears to be a countermove to Egypt's delaying tactics, French and Israeli engineers, according to an an- nouncement from Tel Aviv, have begun to survey a route for an oil pipeline to run from the Gulf of Aqaba to the Mediterra:-. nean. France is reported to be willing to finance part of the construction. Announcement of the move at this time is prob- ably intended in part to indi- cate to Nasr that the Suez Canal's importance may diminish in the future and thus lead him to be more conciliatory now. The Soviet press again played down its direct cover- age of Middle East events, but continued to encourage Egyptian obstructionism. Although a TASS report of 22 December charged that Israel was campaigning for the annexa- tion of the Gaza strip, Soviet propaganda was noticeably re- strained in reacting to Ben- Gurion's announcement on Gaza, An Israeli official has told the American embassy in Tel Aviv that Soviet ambassador Abramov, who was recalled from Tel Aviv on 5 November, was, mak- ing preparations to return by 1 January. SECRET PART I OF IMMEDIATE INTEREST Page 3 of 4 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 The situation in Sumatra arising from the bloodless coup by Indonesian army elements has been complicated by the re- ported arrest of Colonel Sim- bolon, the rebel leader, by Lt. Col. Ginting, who recently re- placed,him as the official ter- ritorial commander in north Sumatra. Ginting pledged that "relations with the central government will carry on as be- fore," but it is doubtful he can command the loyalty of all troops and police in the area, and armed clashes are a possi- bility. Discontent in the Celebes and in Borneo reported- ly has increased as a result of the Sumatran coup, and in south Sumatra, the army is said to have seized control of the area's finances. The cabinet of All Sastroa- znidjojo is in serious trouble. The announced aim of the coup was the, replacement of the pres- ent cabinet by an "honest" gov- ernment which would give greater attention and financial support to non-Javanese areas, take action against high-level cor- ruption, and generally assume a more decisive approach to pressing domestic problems. One small party has already withdrawn from the cabinet, and SECRET the two large Moslem parties-- the Masjumi and the Nahdlatul Ulama--reportedly will with- draw unless President Sukarno calls for the cabinet's resigna- tion. Moreover, Foreign Minis- ter Abdulgani.. has been offi- cially charged with corruption and is facing prosecution. Sentiment among army and political leaders is growing in favor of a "presidential cabinet" led by former vice president Hatta. The demand for such a cabinet, to which members would be appointed without regard to party member- ship, lends itself to Sukarno's own ideas of a "guided democ- racy" and a de-emphasis of- political parties. Whether he would accept Hatta as prime minister, however, is somewhat doubtful in view of their dif- ferences on basic issues. Hatta has told the Ameri- can ambassador that Sukarno himself should assume responsi- bility for setting up a presi- dential cabinet, an indication that Matta and hi~z; supporters may intend to force Sukarno either to make such a move him- self or to turn the government over to them. PART I OF IMMEDIATE INTEREST Page 4 of 4 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 S1 I Ilk CURRENT INTELLIGENCE WEEKLY SUMMARY A new Syrian cabinet has not yet taken office CABINET CRISIS IN SYRIA 25X1 25X1 The conservatives, been arrested, coup to overthrow the Asali although on the defensive, are apparently trying to exert what efforts they can to prevent a complete assumption of power by the leftists. Pressure on the conserva- tives has mounted, with the an- nouncement of a court-martial of some 47 Syrians allegedly involved in an Iraqi-sponsored NOTES AND COMMENTS r' 1956 government. The trial will be 25X1 aimed at conservative and pro- 25X1 Iraqi politicians; several have to make the most of the pec t e plot to intimidate the con- servatives and eliminate their influence. The impending forma- tion of a leftist-dominated government and the upcoming court-martial may drive rightist 25X1 elements to. attempt counterac tion, but their chances of suc- cess appear slim. GREECE AND TURKEY SHIFTING TACTICS ON CYPRUS ISSUE Greece and Turkey appear to be shifting their tactics in seeking a solution to the Cyprus problem. Athens has announced its intention to press for an immediate UN debate when the political committee reconvenes on 3 January and has indirectly indicated that it will emphasize independence rather than self- determination for Cyprus. Tur- key has now abandoned its in- sistence on maintaining the status quo on Cyprus and is urging partition as the only solution which would bar the ultimate union of the island with Greece. The Greek government, in deciding to promote Cypriot independence, is apparently motivated by a desire to get the support in the UN of India and some other countries which seem to suspect that "self- determination" for Cyprus is merely a cover for annexation by Greece. The Soviet bloc would favor independence for Cyprus, particularly since the Communist-front party on the island is the strongest and best-organized political force. The bloc can be expected to op- pose any negotiated settlement and may propose a demilitarized Cyprus under UN supervision. The Greek decision to. press for a quick showdown . with Britain in the UN reflects Athens' conviction that London will not negotiate significant modifica- tions of its latest constitu- tional plan for Cyprus. By urging quick action in the UN, Athens might also reassure the Greek public that no deal was made with the British during the recent visit to Athens of British colonial secretary Lennox-Boyd. Prime Minister Karamanlis apparently hopes the UN will appoint a commission of nations not immediately The leftists can be ex- 25 PART I I NOTES P ND ';CJ:ii .1ENT Page 1 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY concerned to recommend some Cyprus solution. Karamanlis says Greece could accept any solution approved by the UN. Ankara stated in a memo- randum on 20 December that agreement in principle was reached with London during Lennox-Boyd's visit to Turkey. The Turks promised a favorable reaction to the proposed Rad- cliffe constitution for Cyprus in return for Britain's ac- ceptance of the concept of partition, described by the Turks as "integral self-deter- mination." Britain, however, has shown no indication of changing its policy of retaining sover- eignty over Cyprus as long as strategic considerations require. Since the abortive Suez adven- ture, London's determination to avoid a withdrawal from the island has probably been rein- forced. The British cabinet has already considered and rejected the idea of partition, and Lennox-Boyd probably raised the subject in Parliament only to placate the Turks. Athens and Cypriot leaders have already condemned partition as a solution of the dispute, and violence has increased on Cyprus in response to the new British constitutional plan. The shipment of Soviet arms-- including aircraft--into Afghanistan in the past several months raises the possibility of an eventual large-scale armed clash between Afghanistan and Pakistan over Pushtoonistan. The extent of the Soviet arms build-up in Afghanistan is not yet clear, although sub- stantial quantities of ground forces equipment--probably in- cluding a few tanks--are be- lieved to have been delivered in October and November. Even more significant is the develop- ment of the air force, which seems to have been given priority by both the Russians and the Afghans. In addition to the field at Mazar, the Russians are to construct a new military air- field at Begram, 30 miles north of Kabul 25X1 the USSR may also undertake construction of new airfields at Tashkurgan and Kunduz, and possibly also in the Khost-Matun area near the Pakistani border. SECRET PART. II NOTES AND COMMENTS Page 2 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 A dangerous aspect of the Soviet-sponsored aviation build- up is the possibility that the new air force will eventually be used against Pakistan. Af- ghan prime minister Daud, when he announced the arms deals in August, referred back to the decision of the Grand Assembly of Tribes in November 1955 which committed the nation to support the Pushtoonistan move- anent. Despite the apparent lessening.of tension between Pakistan and Afghanistan during the past several months, Daud's actions during his visit to Karachi at the end of November made it clear he continues to be obsessed with the idea of an independent Pushtoon state. In the past, Pakistan has had the advantage of uncontested +-t Broad gauge railroad - i- Narrow gauge railroad All-weather road p MILES 7S0 27 DECEMBER 1956 ~~ /q~4s Gilgit HELMAND RIVER DEVELOPMENT AREA art Sandeman, --- in -puce/ Rawalpindi PAKIST -`MII ~-r"1 SECRET NOTES AND COMM2NTS Page 3 of 17 control of the air over the tribal areas involved in the Pushtoonistan dispute. Daud probably feels that possession of an operational air force would counter this. The develop- ment of such a force would probably require at least sev- eral years, but the mere pres- ence of a substantial quantity of Soviet arms in Afghanistan could encourage new hostile moves agaiast Pakistan. In turn, Pakistan--which thus far has appeared surpris- ingly indifferent to the arms build-up in Afghanistan--might at some future date feel com- pelled to attempt to cripple the Afghan military establish- ment before it can fully absorb the new arms. Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 JLCKL 1 ,,%owe CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 CHOU EN-LAI ANNOUNCES FORTHCOMING TRIP TO THE USSR Chou En-lai announced in Karachi on 24 December he would postpone his scheduled visit to .Afghanistan and go instead to Moscow and larsaw. This news overshadolaed Chou's Pakistan trip, which produced no star- tling developments. Chou re- ceiyed a warm public welcome, but his conversations with offi- cials were apparently confined largely to an exchange of plat- itudes. The final communique empha- sized the "strengthening of friendship" between Pakistan and Communist China, although noting that there was a "divergence of views on many problems" between the two countries. The USSR's relations with other Orbit countries will prob- ably be a principal topic of discussion during Chou's visit to Moscow in January. The Chi- nese premier will be able to re- port the unfavorable Asian re- action to the Soviet armed inter- vention in Hungary. Tailoring his remarks to his Asian audi- ences, Chou frequently during his tour gave assurances that Peiping itself would try to avoid "great-nation chauvinism." Chou may point out to the Soviet leaders that Communist China has lost prestige in the eyes of i important Asian neutrals because it had to express support for the use of Soviet troops in Hungary. Chou is likely to inform the Soviet leaders that Com- munist China favors a relatively liberal and more flexible Soviet policy in Eastern Europe. The Chinese have shown great sympathy for Polish efforts, and for the early Hungarian efforts, to at- tain a greater degree of freedom within the bloc. Chinese com- mentaries have indirectly crit- icized Soviet actions to a degree unprecedented for Peiping, and have described "great-nation chauvinism" as the "main thing" to be avoided in relationships among bloc countries. While Peiping's stand on Eastern European developments, including. its avoidance of com- ment on the Soviet-Yugoslav dispute, probably did not come as a complete surprise to the Soviet leaders, they apparently are disappointed with the Chi- nese position. The Russians will almost certainly seek from Chou a private commitment to support Soviet efforts to pre- serve Moscow's leadership of the Eastern European Satellites. Despite China's effort to dissociate itself from the harder aspects of Soviet policy toward the Satellites, the Chi- nese leaders clearly wish to avoid a public quarrel on the question and have emphasized the need for unity within the bloc. Any Sino-Soviet communique emerging from Chou's visit would probably profess recognition of equality among Communist states, but express the need to strength- en bloc unity and "proletarian internationalise." During his visit, Chou will probably be briefed on the re- cent discussions of the Soviet central committee plenum con- cerning economic policies and the effect, if any, these pol- icies may have on the Soviet aid program to Communist China. Chou will also visit Warsaw in mid-January--the first visit by a non-Soviet leader since the Conulka government was estab- lished. The visit will formalize Peiping's approval of I'darsaw's new relationship with Moscow. SECRET PART I I NOTES AND CC's I12NT S Page 4 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 In private, however, Chou will probably inform the Poles that continued Chinese support-- which reportedly was first given to former party leader Ochab in Peiping last September--will depend on Polish adherence to the principle of bloc solidar- ity under Soviet leadership, a principle which Peiping has called the "highest duty" of Communist states. SOVIET PROPAGANDISTS STRESS VIGILANCE THEME Concern over unfavorable tendencies in the political orientation of the Soviet peo- ple has prompted Moscow to warn Soviet citizens of the need for greater vigilance against the enemies of the USSR. Warning that "ifnperialist reactionaries" employ any means to undermine socialist power, propaganda media have begun to exhort the populace to be on guard against "every manifestation of bour- geois ideology." Emphasis in the press thus far has been on improving ideological work to "clearly demonstrate the advantages of the socialist. system," and there are as yet no indications that repressive measures typical of Stalinist vigilance campaigns are being prepared. These demands for watch- fulness seem to be primarily an effort to justify the use of force in the Hungarian up- rising, which is said to have been instigated by the "reac- tionary" Western powers seeking to reinstitute capitalist re- pression and destroy the social SECRET gains of the Hungarian people. It has been repeatedly alleged that the imperialists fomented the revolt in order to prepare a new war. 25X1 25X1 The Soviet armed forces on 22 December were called on to "pay extraordinary attention to current world events and draw the necessary conclusions." A recent article in the Soviet navy's official newspaper stated that "the government and the armed forces must take into account the provocations and intrigues of the enemies of peace, The state interests of the socialist motherland demand that Soviet fighters increase their military preparedness and vigilance still more." In addition to warning that the imperialists are pre- paring for a new war, the So- viet press has recently pub- lished stories alleging espio- nage activities directed against the whole Soviet bloc. By creating an atmosphere of vigilance against the external NOTES AND COMMENTS Page 5 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 enemy, the regime is seeking to counteract the adverse ef- fects the intervention in Hungary has had on the Soviet populace, particularly young people and intellectuals, and trying to explain popular dis- satisfaction as due to the influence of reactionary, bour- geois ideology. The December issue of the official party journal, Parti- inaya Zhizn, cited a signii ci ant increase in the efforts of stu- dents to "understand questions of theory and present policies," and warned that if their ques- tions were not answered, they would seek information "else- where, thus permitting the pos- sibility for a distortion and a weakening of the struggle with bourgeois and petty bour- . uals_ may succumb to the influence of bourgeois ideology, and one writer warned that "he who casts doubt on the necessity of party leadership of literature aims at the socialist structure, at the Soviet regime, at the Com- munist Party, and at the heart of our people. He opposes the basic interests of the working people." Questions about party and ,government policy and Marxist ideology are explicitly encour- aged as long as they do not serve as a pretext for casting doubt on the fundamentals of the Soviet Communist system. The equating of opposition to party guidance of culture with a rejection of the Soviet system, for example, is a clear warning geois ideology." A local party ; to questioners of party control journal has admitted that "in- 1 that they are approaching SECRET PART I NOTES AND COMMENTS Page 6 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Iftn"dw SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 GOIAULKA'S POSITION AND PROSPECTS 25X1 25X1 Polish party first secre- tary Gomulka is faced with an increasingly stronger party opposition and growing popular discontent, according to recent reports. The responsibilities of office and the resulting need to balance political real- ities carefully have forced him to resort to temporizing tactics in an effort to fulfill high popular expectations while at the same time attempting to forestall Russian counteraction. .His task is made all the more difficult by the weakening of central authority and the loss of party unity which accompanied his rise to power. Goinulka will find it dif- ficult to continue his program in the face of the opposition which threatens from every quarter, and he may not last long in the attempt. The coming spring will undoubtedly be a critical period. By that. time popular hopes will probably have been deflated by the realities of the continuing economic hardships. F -1 In addition to trying for a rapid improvement in the economic, situation, he is now replacing and reforming party cadres and consolidating his position within the army and security forces. Next to the difficult economic situation, the party itself is probably Gomulka's most pressing immediate problem. He has no personal following, no patrons in the Kremlin, no "apparatus," and almost no as-' sociates of tested loyalty and reliability. The "palace revolution" that brought him to power has made the position of most of the regional and lower-level party functionaries untenable. Many have resigned; others have been forced out by popular pressure or in the gradual replacement of cadres now under way. Not associated with the new leadership faction which suddenly materialized at the top, and already compromised by the de-Stalinization movement, they are now swelling the ranks of the dissident group known as the "Natolins." This group,., lacking clear leadership at the moment, is looking to the Soviet Union, from which it is reportedly receiving in- creasing support. It probably hopes this will enable'it to turn from obstructionist tactics to counterrevolution. The con- tinued suppression and gradual neutralization of this faction in the face of subversive sup- port from the Kremlin will challenge to the utmost Gomulka's hold on the state security and party control forces. C'Tol,iulka is also confronted by increasing disaffection among his formmier supporters., partic- ularly journalists, students and intellectuals who are dismayed SECRET PART II N YI S AND COP, M N T S Page 7 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 by his go-slow tactics.and who resent as an act of bad faith measures that appear repressive. These groups, together with the workers, consider themselves the self-styled leaders in the democratization movement and feel that Gomulka owes to them everything he is today. Demands among them f?r greater journal- istic freedom, for further liberalization of the election system and for more rapid imple- mentation of worker self-govern- ment are kept from-getting out of hand more by awareness of the Hungarian example and its aftermath than by effective regime control. They seem to be biding their time with Go- mulka until a more favorable. alternative-can be realized. The Kremlin leadership .has its own reasons to be op- posed to Goanulka; he has started, in the name of an "independent road to socialism," a series of innovations which, like a cancer, will certainly make damaging inroads if not stopped in time. Among these innovations, cessation of jamming, agree- ment to permit religious educa- tion in primary and secondary schools, and de-emphasis on . collectivization of agriculture accompanied'by abolition of the delivery quota system are per- haps the greatest threat to the Soviet system. Another in- novation is modification of the election system to a degree which could permit election to the Sejm on 20 January of-an increased number of delegates who favor greater independence from the Soviet Union. Poland has also become a divisive element in the social- ist camp by.seeking support from China and Yugoslavia for its independent road. Further, the Soviet leadership must harbor a bitter personal animosity toward Gomulka for the humiliat- ing defeat it suffered in at- tempting to dictate to the Pol- ish central committee on 19-20 October. Recent Soviet moves which have tended to support Gomulka, such as the agreement on station- ing of troops in Poland, sug- gest that the Soviet leader- ship considers it has no prac- tical alternative at the moment. Fear is growing in official Warsaw circles, however, that the USSR may withhold economic aid in order to aggravate the in- ternal situation and bring about a better opportunity to reassert Soviet control. Thus, the Kremlin seems to be counting on internal difficulties to bring Gomulka down, confident, meanwhile, that the inescapable 25X1 from straying too far. need for friendly relations with the USSR will prevent him . HUNGARIAN REGIME SEEKS CO-OPT 1-i,A'. I0N CF PUBLIC The Hungarian regime, no longer forced to combat violence and general strikes, has stepped up its propaganda campaign to convince the overwhelmingly hostile and suspicious popula- tion that it is working for the popular welfare and is worthy of popular confidence. Attempt- ing to minimize the terror tac- tics of the newly constituted security forces and to ignore the presence of Soviet troops, press and radio statements promise daily that life can be better than ever if everyone will now join an all-out ef- fort to rebuild the nation's shattered economy. The Soviet occupation will have to be maintained for the foreseeable future and popular hostility SECRET PART II NOTES AND CO MENTS Page 8 of .17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 is unlikely to diminish unless major political concessions--. which would threaten the regime's authority--are granted during the coming year. With industrial production at a virtual standstill for twos months, with about half of the nation's coal miners no longer available for mining work, and with major damage to be repaired in several cities, the country is faced with a long and grueling battle for recovery. The regime has ad- mitted that during the first quarter of 1957 light indus- trial production will be at only 50 to 60 percent of capac- ity, that sporadic shortages of some food supplies will continue for another half year, and that coal production this year is already approximately 40 percent short of the planned goal. Fuel shortages have forced the closing of several fac- tories, with the workers sent home on half pay. Further unemployment is expected, and regime economists foresee up to 200,000 workers without jobs by the beginning of 1957. Economic aid from the USSR will allegedly supply on credit the country's bread grain needs until the end of May. But, with trade-debts piling up and exports at a standstill, some form of over-all large-scale aid will be needed. Press re- ports from Budapest claim that the Hungarian government had been planning to ask for a $100,000,000 loan from the International Bank for Re- construction and Development, even though not a member. The Kadar regime, although continuing its use of martial law, curfews and arrests of op- position figures, is attempting to appear as conciliatory as possible. It has de-emphasized its police methods, has stressed the alleged legality of its tactics, has continued to per- mit the formation of ostensibly nonparty youth groups, news- papers, and trade unions, and apparently has avoided strict regime censorship of some news media. Negotiations with minority party figures are reportedly in progress and radio Budapest recently prom- ised that the government would be "extended" in the near future. Although the people have been deprived of their top leadership and are no longer united in active and violent opposition to the regime, basic hostility probably re- mains as high as ever. Spor- adic strikes, occasional anti- regime demonstrations and an all-pervading popular apathy can be expected to plague the regime throughout the coming year. EAST GERMAN CRACKDOWN ON INTELLECTUALS AND STUDENTS The East German regime is making alternate threats and promises to intellectuals and university students, while playing on the theme that ex- cesses and misguided actions by these groups were responsible for the anti-Soviet developments in Poland and Hungary. Some intellectuals have been arrested and a few university students expelled as a warning to poten- tial dissident elements. Important party and government officials are joining the press and radio in the campaign to combat the spread of "dangerous" ideas. Party first secretary lac- cuse Hungarian intellectuals of precipitating the revolution in that country. Noting that SECRET NOTES AND COMMENTS Page 9 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURkENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 tendencies similar to those evidenced by Hungarian intel- lectuals had been observed among some East Germans, he warned that under no circum- stance would his regime toler- ate such leanings. Some prominent intellec-' tuals connected with publica- tions denounced by Ulbricht for printing "defeatist arti- cles" by Hungarian intellec- tuals have now been arrested, probably as a warding to others to hew more closely to the party.line. Writers and intel- lectuals are clearly not to be permitted to spearhead a drive for liberalization in East Germany, as they did in Poland and Hungary. Recent pronouncements in the party press by leading Communist officials reflect the regime's growing concern over widespread ideological deviations among students, particularly their unwillingness to accept the orthodox Russian interpretation of the recent developments in Eastern Europe. The party's problems are now compounded, since it must com- bat not only Western ideas but also the concept of a develop- ment of national Communism within the Soviet bloc. The government is especially sensi- tive to hostility among young peopled A letter from the party central committee signed by Ulbricht illustrates the re- gime's approach to the problem. Clearly threatening expulsion or worse for those who do not conform, it warned, "At our universities and colleges only those may study who are faith- ful and loyal to the worker- peasant power." The letter cited the necessity for close ties between students and workers, and then continued, "He who attempts to maintain or restore capitalism--even though he may try to'disguise capitalism with hypocritical slogans...is trying to stem the course of the wheel of history and will fail in the attempt," Minister of State Security Ernst Wollweber, long-time Com- munist thug and hatchet man, got into the act with an arti- cle in the party newspaper on 21 December, warning, "We will not tolerate so-called 'free' discussion that leads to anti- democratic and antisocialist ideology." He said enemy agents in universities, encouraged by the Hungarian revolt, had been arrested. In an effort further to isolate East German students from forbidden ideologies, in- cluding national Communism, the government has sharply curtailed visits of foreign delegations and athletic teams, partic"ularly, from West Germany and Poland. BCLIVIAN MONETARY PROGRAM MAY PROVOKE CRISIS The Bolivian government's political stability has been threatened by labor's opposition to the immediate sacrifices demanded of it under the sweep- ing monetary stabilization pro- gram promulgated on 15 December to check the country's dan- gerous inflationary spiral. Backed by credits of the Inter- national Monetary Fund and the US government, the plan calls for a drastic revision of fiscal practices and the application SECRET PART II NOTES AND COMMENTS Page 10 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET of austerity measures which in their initial phases bear particularly hard on the Bolivian worker, who understands neither the economic exigencies behind stabilization nor its ultimate aims. The new administration of moderate President Siles Zuazo appeared to have won substantial advance co-operation for the plan from labor and political leaders of the government Nationalist Revolutionary Movement (MNR). The first days of the program's opera- tion were punctuated, however, by sharp price increases, spo- radic rioting and serious violence in the mining districts over labor's loss of subsidized food purchases. Influential labor leaders, whose backing may be vital for the program's eventual success, wavered in their support. Juan Lechin, president of the senate and head of the powerful Bolivian Work- ers Central (COB), threatened to denounce the reform as prej- udicial to the workers' in- terests and convened a series of meetings starting 21 Decem- ber to-determine the COB's future attitude toward the program. Discouraged by such ad- verse reactions, Siles has con- sidered stepping down from office in favor of leftist Vice President Chavez, and the cabinet reportedly tendered its resignation on 18 December in protest against a left-wing congressional attack. Chavez, who is now in New York for the UN General Assembly meetings, has subsequently assured US officials of his support of the stabilization program. Ever since Siles' inaug- uration last August, however, there has been a widening rift between the left and moderate wings of the MNR.. As the power base of the left wing of the party, the COB considers itself a co-partner in direct- ing government policy. Its leaders control congress, the vice presidency, and four cabinet posts. In the event the stabili-- zation program becomes the issue provoking a struggle for power within the MNR, the COB and other leftist elements could possibly command--in addition to rank-and-file union affili- ates--the great majority of the armed worker and peasant militia. The militia is numeri- cally superior to the combined armed forces and police, and in fighting ability is believed to be an almost equal match for them--particularly since the loyalty of the police and armed forces to the government might be affected by an open split in the MNR. Although the concerted opposition of labor could probably wreck the stabiliza- tion plan, leftist labor and political leaders may be re- luctant to force the downfall of the government over this issue. As in the past, labor leaders may be expected to threaten violent action in a continuing effort to extract special concessions for the worker, but they are probably not eager to assume the respon- sibilities of office themselves in a deteriorating economic situation, which apparently 25X1 measures. can be rectified only through politically difficult austerity SECRET PART II NOTES AND COMMENTS Page 11 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 27 December 1956 Indignation over recent Soviet actions in Hungary has brought an almost complete re- versal of British public at- titudes toward the desirability of expanding contacts with the Soviet Union. Virtually all trade union and student exchange trips have been caazceled. Sever- al unions with considerable Communist sentiment and which had earlier led the drive for expanding contacts with the bloc have dropped plans to ex- chang:; delegations. On the na- tional level, the General Coun- cil of the Trades Union Congress (TUC) on 29 November urged its 187 affiliates to abandon any such glans. The TUC was capi- talizing on the changed climate of opinion to give voice to its own skepticism of the value of the exchanges, which it had questioned even before the dis- turbances in Eastern Europe. The Foreign Office has modified its position in such a way as not to preclude a re- sumption of its policy of pro- moting contacts. Britain will avoid exchanges that might be accompanied by great publicity, such as a scheduled visit of the Sadler Wells Ballet to Moscow. The Foreign Office states that it intends to avoid a "rigid" attitude and will consider exchanges that would benefit Britain from a technical or intelligence point of view. While thus accommodating to public opinion, the governr ment does not appear to have abandoned its view that expanded exchanges of individuals and groups offer the principal hope for a long-term improvement in 25X1 Anglo-Soviet relations. One visit still on the calendar is that of Prime Minister Eden to Moscow in May 1957. Algeria Terrorism increased during the Christmas season despite repeated French claims that military action has eliminated all large bands. In addition, a countrywide week-long general strike at an indefinite date has been decreed by the Nation- al Liberation Front. Minister Resident Lacoste in Algeria has scored a victory over local French settler ex- tremists. He influenced the mayors in the departments of Oran and Constantine not to subscribe to resolutions drawn up by their Algiers Department colleagues calling for their resignations if the government dissolved settler-controlled municipal and departmental councils in order to permit greater Moslem participation. Councils are being dissolved, but even so, Lacoste still has been unable to get a singze SECRET PART II NOTES AND COMMENTS Page 12 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 146"11* %NEW SECRET CURRENT INTELLIGENCE WEEKLI SUMMARY 27 December 1956 influential Moslem to partici- pate in his reform program. About 15 January, Premier Mollet is expected to decree equal civil rights, election of a unicameral body from-which a prime minister chosen by Paris would select a cabinet respon- sible to the assembly, and a reconstitution of local councils to provide equal French and Moslem representation. This plan will probably be unaccept- able to the rebels, who demand recognition of the principle of Algerian independence. Morocco and Tunisia Greater co-operation be- tween France and Morocco and Tunisia appears probable de- spite disagreement over the status of French troops and the extent of Paris' contribution to the local budgets. In Rabat, Foreign Minister Balafrej and another cabinet minister re- portedly have convinced the sultan that a compromise with France is necessary because of the serious economic situation. The dominant Istiglal party has not yet accepted this thesis, and the sultan will delay ap- pointing an ambassador to France until Paris-makes some concession to avoid arousing the party members. The climate of the Tuni- sion-French negotiations has improved principally as a result of Tunisia's realization that it must depend on France for funds. Bourghiba was un- usually friendly recently while presiding at a French cultural gathering. Agreement has been reached for the French govern- ment to purchase outlying French farms, and Paris has made some financial advances to permit Tunis to pay its current ex- penses. The Laotian cabinet on 22 December refused to approve a communique" signed by Prime Minister Souvanna Phouma and Pathet Lao chief Souphannouvong which called for the immediate inclusion of several Pathet Lao leaders in the cabinet but of- fered no effective guarantees for restoration of the govern- ment's control over the disputed provinces and for integration of Pathet forces into the royal army, Although unwilling to accept a sellout to the Pathet Lao, the cabinet still wishes to reach a settlement and has agreed to accept two Pathet Lao leaders in the cabinet with minor portfolios, if an accept- able agreement can be reached on the dissolution of the Pathet Lao and for the immediate im- position of government control over the Pathet forces and the two northern provinces. SECRET PART II NOTES AND COMMENTS Page 13 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 This latest development poses a dilemma for the Pathet Lao, which, although willing to make sweeping concessions "in principle," has heretofore shown great reluctance to agree to specific terms which threat- ened its control over the two provinces. On the other hand, if the Pathets fail to meet the cabinet's conditions, the Souvanna Phouma government prob- ably will fall, terminating the agreements already negotiat- ed. In this connection, Sou- vanna on 22 December reportedly reaffirmed his intention to resign if no solution to the Pathet problem is found. In the event an acceptable agreement is reached, the gov- ernment reportedly plans to place the issue before the National Assembly during the first week in January. A two- thirds majority will then be required to approve the "broadening of the cabinet" to include the Pathet Lao officials. 25X1 25X1 Although the disorders in North Vietnam last month were apparently confined to rural SECRET own admissions, present increas- ing evidence of widespread dis- content in the urban areas of Hanoi and Haiphong, especially among intellectuals and mer- chants. Ho Chi Minh's press decree of 15 December tightened the already stringent regulation of publications and provided the basis for the Hanoi Admin- istrative Committee's immediate suspension of the new literary periodical People's Culture. In the five issues of this periodical since it began publication several months ago, there were apparently several articles which drew attention to the repression of individual creativeness in the arts by the Communist bureaucracy. In announcing the suspension, Hanoi radio declared that every issue caused "readers to be- come discouraged, pessimistic, and dubious of our regime and leadership... and had a disas- trous effect on the consoli- dation of North Vietnam." Apart from considerations of academic freedom, the un- easiness of many intellectuals derives in large part from their bourgeois or landowner backgrounds. The livelihoods of their families and close friends were invariably affect- ed by the Communist land re- form and tax policies; some even lost their lives. In November a Hanoi publication frankly acknowledged that the resistance of intellectuals to the regime is still a problem requiring solution. There have been unconfirmed reports that students at Hanoi University staged pro- test meetings to criticize certain regime policies. There are also indications of dissatisfaction among the general population in the cities. a p ong res eats, particu- larly merchants, frequently SECRET PART II NOTES AND COMMENTS Page 14 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 25X1 25X1 express the opinion that "con- ditions could not be worse" than at present, mainly because of increasingly heavy taxes. F (Hanoi radio itself, in one of its recent self-criticisms, admitted that the North was beset by inequi- table taxation, inflation, and scarcity of consumer goods. It called for correction of mis- takes in order to "allay the unrest of all the people's classes" in the capital city. SECRET PART II NOTES AND COMMENTS Page 15 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY SCANDALS PLAGUE RHEE ADMINISTRATION Three scandals, two in- volving assassinations and one corruption, have lately embar- rassed the Syngman Rhee admin- istration in South Korea. The handling of the cases suggests that Rhee is reluctant at this time to protect officials guilty of misconduct, and this attitude may presage at least a partial cleanup within the corruption- ridden Liberal Party. Two trials now hold public attention in South Korea. In one, the assailant of Vice President Chang Myon has said he was aided in his assassina- tion attempt by the South Ko- rean National Police. In the other, Lt. Gen. Kang Mun-bong, one of South Korea's ablest generals and a close friend of Chairman of the Joint Chiefs of Staff Chong Il-Kwon, ap- pears likely to be convicted of complicity in the year-old slaying of CIC chief Maj. Gen. Kim Chang-yong ("Snake" Kim). To date there is no reli- able evidence to link senior administration officials to the wounding of Chang. However, the long-standing hostility between Rhee and his vice presi- dent has caused the incident to be embarrassing to the ad- ministration. The Democratic Party has alleged that his assailant had visited Seoul police headquarters several times prior to the shooting. It is possible certain police officials, anxious to curry favor with Rhee, encouraged the attempt on Chang's life. On top of these develop- ments, in late November two Liberal Party politicians, in- cluding Assembly vice speaker Hwang Sang-su, were forced to resign high assembly posts after being linked with the smuggling of a consignment of watches from Hong Kong. The incident prompted Rhee to an- nounce that he would sever all connections with persons whose conduct is detrimental to the national welfare, without re- gard to past services. While Rhee has shown no sign of disrupting legal proc- esses in the smuggling and Chang Myon cases, he may desire 25X1 to limit the scope of the "Snake" Kim investigation. case appears to. be adversely affecting army morale and is undermining popular confidence in the army. President Rhee's stated intention not to protect those guilty of personal misconduct will probably not preclude ex- tralegal activities on behalf of the"LiberaI Party. SECRET PART II NOTES AND COMMENTS Page 16 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 -w SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY It appears likely that the police, whose influence and independence has increased in recent months, will continue to "protect" Rhee from his "enemies." INDIAN REACTION TO NEHRU'S VISIT TO UNITED STATES The Indian public and press appear pleased with Prime Min- ister Nehru's reception in the United States and feel that there will be a definite im- provement in Indian-American relations. There is no reason to be- lieve this favorable reaction will last for long, however, or that Nehru himself has changed his basic beliefs that military pacts are bad and that India must remain friendly with both the USSR and Communist China. The Kashmir question, to be raised in the United Nations in January, is likely to produce renewed Indian criticism of the United States. More than 100 members of the Indian parliament sent a message to Nehru on 21 December expressing "deep appreciation for his great achievements in cementing friendship between India and the United States." That was only to be expected when two minds so earnestly ded- icated to the cause of peace and human progress discussed world problems in an informal atmos- phere." Another paper commented on the meeting: "It comes at a moment of history when the policies of the United States and India, which had seemed to follow divergent paths, have at last coincided and found a firm basis of co-operation with the UN." Other Indian papers com- ment: "Of all that has been published about the visit, the most arresting statements are in Nehru's address to the UN General Assembly. Nehru's speech should convince all alike that the future of the UN should not be judged by comparing its apparently meager achievement... the future of world peace depends on world opinion which will give the UN the strength it needs for throwing all its weight effec- tively against the aggressor." The Indian press has car- ried extensive reports of the Eisenhower-Nehru talks, as well as of Nehru's New York visit. Commenting on the Eisenhower- Nehru joint communique, one paper observed: "Never perhaps has so much been said in so few words...the utter sincerity of the declaration is so apparent. The only discordant note struck was by the Indian Commu- nist Party organ Swadinhata, which stated that the Eisenhower- Nehru communique showed a strong departure from Nehru's former "strong, healthy, independent, self-sufficient principles." SECRET PART II NOTES AND COMMENTS Page 17 of 17 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 1-4001 WAtwiplialik _1MW CURRENT INTELLIGENCE WEEKLY SU$ "GARY THE BALTIC STATES: CHRONIC' TROUBLE Lithuanian party boss Antanas Snechkus admitted in mid-December that the Hungarian revolt had encouraged "bourgeois nationalist elements, and their accomplices" in Lithuania to raise their heads, and attack the Communist Party. Early in November anti-Soviet rioters in several cities demanded the withdrawal of Russians from Lithuania, and local party concern over student unrest in Latvia and Estonia was expressed early this month. These and other recent develop- ments in the Baltic states in- dicate that fundamental anti- Communism and resistance to Soviet rule are still strong and perhaps growing 16 years after Lithuania, Latvia and Estonia were incorporated into the USSR. Seizure of Baltic States The Soviets gained an initial foothold in the Baltic area in Octo- ber 1939 when "mutual assistance" pacts were concluded with the three' neutral republics. By May 1940, the Kremlin had evidently decided to take complete . control in the Baltic republics and military occupation was completed in mid-June. The Kremlin demanded that the parliament of each republic be dissolved and a new government elected. Elections held in July achieved the obvious results. In early August, each nation asked ALAND ISLANDS and received admission into the Soviet Union. The princi- pal Western powers have never recognized this development, however, a fact which many sources believe to be an important element in continued Baltic resistance to Soviet rule. Soviet Control The Kremlin has done little to modify the harsh policies it put into effect on the admission of the Baltic states into the USSR. The post-Stalin thaw apparently has not been as rapid there as in other areas of the Soviet Union, and the basic features of Soviet control remain unaltered. L LATVIAN ? Liepaja L I T H U A N I A ~/ Kaunas ? ~! J ? Olsztyn LAND EIDENTI VILN.YU ....... Former Estonian, Latvian, r'`' I PATTERNS AND PERSPECTIVES Page I of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY The Baltic regimes have traditionally been headed by Moscow-trained natives like Snechkus in Lithuania and Yanus Kalnberzin in Latvia, who have tossed their Communist parties since 1940. In both party and government, key posi- tions on the second echelon have usually been held by Russians. Between 1944 and 1953, for example, there was an almost unbroken succession of Russian second secretaries of the party in each republic. In addition, Slavs have always comprised a strong mi-- nority"in the Baltic central committees, and principal cabinet portfolios have often been held by specialists from Moscow. These regimes are maintained in power by the presence of large numbers of Soviet troops, augmented by internal security troops, whose continued presence is justified by the alleged need to defend the Baltic Sea approaches to the Soviet Union. The keynote of Moscow's Baltic policy has been the Sovietization' of all spheres of life. Primary attention has been directed to the socialization of industry, collectivization of agriculture, and Communist education of the populace, which, according to 1956 Soviet statistics, numbers 5,800,000. Implementation of this policy often entails purges and mass deportation of re- calcitrants. The most extensive deportations took place in 1940, after the Soviets occupied the area, and in 1944, when it was "liberated" from German occupation. While no reliable figures are available, the more than 100,000 persons were deported in these periods. Banishment of natives to Siberia reportedly continued in 1948, 1949, 1950 and 1953. The last major purge occurred in early 1950, when the Estonian party underwent a thorough cleansing in order to eliminate "bourgeois nationalism" and to correct the serious mistakes in the "allocation and training of cadres" which had resulted in the "admission to party ranks of kulaks and other hostile elements." The only significant shift in Baltic policy occurred in June 153 following charges at party plenums that distortions of the Lenin-Stalin nation- alities policy had been allowed in the past. As a result, the Russian second secretaries were replaced by natives. Similar plenums with similar results were also held in the Ukrainian and Georgian Republics; this de-Russification policy may have been the result of the machinations of Beria, who was seeking to bolster his own position, or may have been undertaken by the entire leadership in order to preclude adverse reactions to Stalin's death by making concessions to local national sentiment. By early 1954 the trend had been reversed in the Baltic states, and Russians again began to appear in lead- ing party and government posts. By January 1956 the post of party second secretary had re- verted to Russians in both Latvia and Lithuania. Effects of Soviet Policy Moscow's acquisition of Latvia, Lithuania and Estonia satisfied some of the Kremlin's major strategic requirements. It secured a portion of the western boundary against land- based attack and increased the USSR's acces to maritime trade 25X1 routes. It also added to the Soviet Union three states whose economies and cultures were already well developed. Twelve years of uninter- rupted Sovietization (1944-56), however, have served to SECRET PAP T III PATTERNS AND PERS-_6vTIVr6S Page 2 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 strenmthen the basic anti- Communism of a majority of the native population. Economic, recovery in the postwar period han been slow and. while the living standard in the Baltic area is evidently still some- what higher than in the rest of the USSR, several reports suggest that,fin contrast to the USSR, it has not surpassed its prewar level. Russification in all spheres of life also causes considerable resentment. Russian has replaced native tongues as the official language of govern-' ment, and heavy doses of Commu- nist propaganda are administered daily in an attempt to convince iI the population of the superior- ity of the Soviet system. Par- ticularly in the cities, both military personnel and the thousands of Russian civilians who poured into the area after the deportations receive preferential treatement even in insignificant matters, such as preferential seating in theaters. The net result has been to make many natives feel like second- class citizens in their own countries. Current Situation The Baltic area has been closed to foreigners since 1940 and, as a result, little firsthand information has been obtained concerning the after- math of de-Stalinization there. It is evident that tensions lessened and fear of the secret police diminished noticeably. As a result of recent amnesties, small numbers of former inmates of slave labor camps have begun to drift back into h area. t e situation erwise remains much the same as it was prior to Stalin` death. Stubborn passive resist- ance'continues in rural districts. Party plenums held in each republic during 1956 demanded an improvement in political work among the rural population. low party member- ship on collective farms is regarded as a serious and continuing problem. there 25X1 are still many peop who who prefer to "live in an illegal situation" rather than to take advantage of the 1955 amnesty for those who collaborated with the Germans. The outbreak of rioting in November provided the first indication of open resistance in the Baltic area in many years, and the admission by Snechkus of disturbances in his bailiwick conceded for the first time that events in the Satellites have had serious repercussions within the USSR. It may be, however, that Snechkus' treatment of the disturbances is of greater significance than the events themselves. His statement that it is the youth and stu- dents who are most susceptible to the lies of the bourgeois nationalists implies that years of Communist indoctrination have not succeeded in winning Lithuanian youth over to Communism. Repressive action against dissident elements in the Bal- tics may be in preparation. Snechkus asserted that it was impossible to "remain passive" while the youth were being im- bued with false and idealized views of bourgeois life. If an attempt is made to overcome resistance through repression, 25X1 however, it does not seem likely to enjoy any more success than have similar moves in the past. SECRET PART III PATTERNS AND PERSPECTIVES Page 3 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Communist China probably will not achieve the high tar- gets for agriculture of the Second Five-Year Plan (1958- 1962), unless the regime invests more than is now scheduled. Peiping's planning relies heavily on the farms to produce the surpluses needed to pay for the ambitious industrialization pro- gram. To date,the pressure of a growing population on land resources and the unwillingness of the regime to invest heavily in agricultural machinery and fertilizer have made increas- ingly difficult the realization of such surpluses. The regime began in 1955 a major effort to socialize agriculture in order to increase state control over crop output. JAMMU AND 1(ASH MIR (STerub Irv D~SPV?[I Lhasa AGRICULTURAL AREAS 27 DECEMBER 1956 24393 Agricultural output in Com- munist China constitutes an estimated 45 percent of the gross national product, and 80 percent of the population lives on farms. China's agricultural production--and its population-- are greater than that of any other country in the world. The land is worked very intensively. Whereas 168,000,000 Americans are supported by 866,000 square miles of cultivated land, China's 600,000,000 are fed from some 428,000 square miles of agri- culturally productive land. Rice accounts for around one half of cereal production. This is significant from thel HUp.EH .Hank. OTTONs K-iy-p" )fi` SECRET RTH 'NAM f AN TUU' Canron ~d:1"'? EAST CHINA SEA PART III PATTERNS AND PERSPECTIVES Page 4 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 MUTUAL AID TEAMS LOW-LEVEL CO-OP .80 ADVANCED CO-OP COMMUNIST CHINA PROGRESS IN PERCENT OF RURAL FAMILIES 100 1951 (EARLY) 1952 (EARLY) SECRET 1957 (SPRING) (PLANNED) standpoint of mechanization and' collectivization, since paddy farming is not easily improved by mechanization or by merging small plots into larger fields. The problem of increasing farm production is not one of im- proving labor productivity, but one of increasing land produc- tivity. Some increase in yields is possible through the relatively inexpensive measures of greater use of natural fertilizer, better seeds and insecticides, and through selective stock breeding and small-scale irriga- tion and flood control. Any major improvement in the balance of population and food supply, however, will probably come about only with large-scale outlays, particularly for chem- ical fertilizers. A major problem facing the regime is maintaining production incentives. To prevent discon- tent among. the millions of peasants who have lost and are losing property through collec- tivization, it is necessary to demonstrate that socialism in- creases their income. While the progress of collectivization seems to have been to the gen- eral satisfaction of the leader- ship, some fairly serious side effects have been admitted. The nor- mal sideline produc- tion of the farmers in off seasons ap- pears to have been neglected. This has decreased the income of the peasants and reduced the amount of raw materials avail- able for some light industries and ex- port trade. Also, the numbers of fowl and livestock have declined under the collectivization pro- gram. 61211 Socialization Program The' regime has almost completed a campaign to socialize agriculture, begun in 1950, which gives Peiping a mechanism for extracting the surpluses it needs for its investment program. The process of socialization began with the land reform program which, theoretically at least, took land from the."landlord" and "rich peasant" classes and re- distributed it among land-poor peasants. Next, "mutual aid teams" were established in which neighboring families pooled their labor, animals and imple- ments for certain tasks at certain seasons. The peasant, however, remained an individual agent. The third and fourth phases have involved, the establishment of agricultural producer co- operatives. Producer co-ops proceed from "lower" or "semi- socialist" to the fourth stage of "advanced" or "fully social- ist." In the lower form, land and property are pooled and the individual is paid a share of the produce both on his labor and on the value of his capital contributions. In the advanced form,, land and property are collectively owned and each member is paid exclusively ac- cording to the amount of work he performs. SECRET PART III PATTERNS AND PERSPECTIVES Page 5 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 NOW' SECRET N"We An advanced co-op encom- passes between 100 and 300 peas- ant households. As socializa- tion progresses, these co-ops presumably will be combined into much larger units until they become bona fide collective farms. For example, the model Peace Collective Farm outside Peiping has 2,400 peasant households. The fifth and last stage of socialization, according to Peiping's doctrine, is technical reform. The regime is not likely to make spectacular gains in this field for some years to come. In July 1955 the inter- vention of Chairman Mao Tse-tung resulted in a tremendous ac- celeration of the drive toward the fully socialist form. It is now planned that 90 percent of China's peasants will be in advanced co-ops by the spring of 1957. Agricultural Plans Communist plans for agri- cultural production are set forth in three programs: the First Five-Year Plan (1952- 1957), the Second Five-Year Plan (1958-1962) and a long- range Twelve-Year Draft National Program for the Development of Agriculture (1955-1967). Production targets for the First Five-Year Plan have shuttled up and down. The cur- rent target, as spelled out at the eighth party congress in September 1956, is the same as the original target. It calls for a 17.6-percent in- crease in food crop production between 1952 and 1957 (164,- 000,000 to 193,000,000 metric tons) and for a 26-percent in- crease in cotton output (1,300,- 000 to 1,630,000 tons) for the same period. Peiping claimed in late November that food crop production had already reached the 1957 goal. The Second Five-Year Plan calls for a near doubling of 1952 food and cotton produc- tion by 1962. Under the twelve- year program, food crop produc- tion in 1967 is to reach 450,- 000,000 tons, a 175-percent..i.n- crease over 1952, and cotton output is to reach 4,000,000 tons. While primary reliance is being placed on increasing yields, ambitious plans for the expansion of cultivated acreage have been drafted. In addition, construction is under way on -=FOQ[? -CRQ-PL- 150.0 1436 163.9 163.9 APPROX. 192.0 180.0 192.8 187.0 APPROX. 250 217 :COTTON 0'S 1.3 1.3 1.6+ 1.6 1.6 1.7 APPROX. 4 X 2 2.4 1936 . LIVESTOCK 189.3 208.0 324.9 APPROX. 510 0 (MILLION HEAD) . CHEMICAL 0.2 2 0 0 2 0.6 0.5 0.6 0.5 3.0-3.2 FERTILIZER 1941 . . SECRET PART III PATTERNS AND PERSPECTIVES Page 6 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 SECRET several long-term multipurpose water conservancy projects, In the near future, however, most of the benefits in the field of water conservancy will come from projects on the local level. Plans to produce heavier and more complicated iarm.equip- ment, such as tractors, reapers and combine harvesters, are in an early stage, and production of such items will remain in- significant for some time. Three tractor plants are being built--in Loyang, Tientsin and Nanking--which should begin to meet an important part of China's needs after 1958. Most of China's heavier equipment has been imported from other bloc countries. More important than mecha- nization in Communist plans. is the provision for better hand- and animal-drawn implements. For example, the traditional plow used by the vast majority of Chinese peasants does not plow deeply or turn the earth properly. Some 1,300,000 two- wheeled plows were delivered to peasants in the first half of 1956. Increased use of chemical fertilizers probably holds the greatest single promise for in- creasing agricultural production; in China. Natural fertilizer is in short supply. Probably as little as 1.0 percent of the amount of chemical fertilizer which could be profitably ap- plied is now in use, and the prospect is that only a small fraction of chemical fertilizer requirements will be met for many years. Agriculture, forestry and water conservancy received only SECRET 7.6 percent of capital con- struction investment under the First Five-Year Plan. Official statements on the Second Five- Year Plan indicate that agri- cultural investment, although double the First Five-Year Plan figure, is still sub- ordinate to heavy industrial investment, and that to assure planned investment rates, the regime is relying chiefly on an even more intensive effort by the peasants and on better control over production. Prospects According to Communist doctrine, production increases will be effected through social- ization. Some positive results can be achieved by merging small individual plots of land into larger fields, centralizing management, better planning on land utilization, and organizing labor for land and capital im- provements. Set against these probable gains are the disrup- tive effects of collectivization on the countryside, the fact that agriculture gets a small portion of total investment, and a nationwide shortage of qualified cadres to manage the collectives. The basic problem of increas- ing yields still lies in main- taining and improving the fertility of the land, regard- less of the organizational forms used. gets of the Second Five-Year Plan or the long-range 12-year Production increases prob- ably will keep pace with popula- tion growth over the next five years. Short of revolutionary changes in agricultural tech- nology or drastic increases in investment, it is unlikely that Communist China can attain the over-all agricultural tar- 25X1 PART III PATTERNS AND PERSPECTIVES Page 7 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927A001100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SU1V7?ARY 27 December 1956 SPAIN: INFLATIONARY PRESSURES Spain is threatened by growing inflation as a result of pay raises averaging 40 to 45 percent decreed in November for industrial and agricultural workers. Government control measures thus far seem inadequate and, should an inflationary spiral develop, the ensuing eco- nomic upsets and popular unrest could endanger Franco's position. Siace the autumn of 1955, Spanish officials have expressed concern over the increasing danger of Inflation, the steady rise in living costs, and the critical shortages of basic foods. The problem was inten- sified by the unusually severe winter last year and by wage boosts in the spring and fall of 1950. The increases given to in- dustrial workers in April, as the first round of a general pay raise to help offset the rise in living costs, failed to satisfy labor's demands and were followed almost immediately by a protracted strike in the northern industrial centers. The government has shown its apprehension of further worker unrest by decreeing a substan- tial wage boost for agricultur- al as well as industrial workers effective 1 November to replace the modest "second-round" in- crease originally planned for October. I..1' lat i onary Threat in 1956 are the pub- lic and private in- vestment boom, wage increases exceeding Inflation has been encouraged since 1954 by an increased domestic demand, sup- ported by an expan- sion of bank credit and the total money supply. Factors con- tributing to this condition since early the growth in productivity, and foreign exchange shortages re- sulting from the effects of last February's freezing weath- er on Spain's agricultural ex- ports. The damage from the cold wave is expected to curtail citrus crop export earnings at least until 1959, thus limiting essential imports from Western Europe. Compensatory expansion of other Spanish exports has aggravated the inflationary situation by reducing supplies of these commodities on the home market. An additional in- flationary factor will be the anticipated tripling of counter- part expenditures for American base construction in the cur- rent fiscal year and through fiscal 1958. Budget Deficit Government borrowing to finance economic development programs has resulted in a growing over-all budget deficit. It was estimated in early Octo- ber that the deficit for 1956 might be as much as 513, 000, 0()0, some 66 percent above the 1955 figure," Even this estimate does not take into account the ad- ditional wage boosts decreed by the government on 26 October for some 8,000,000 industrial and agricultural workers. These raises, which average 40 to 45 percent and range as high as 75 percent, are equivalent to over $820,000,000 this year, SPAIN-COST OF LIVING INDEX (1953=100) SECRET JAN FEB MAR 1956 I'A. LT I I I PATTERNS AND PERSPECTIVES Page n ni' l Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 i v Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY or more than 10 percent of the national income. These wage increases, with the additional family, seniority or production bonuses expected to accompany them, will probably satisfy the workers' demands for higher pay, but unless there is a concomitant increase in produc- tivity, a rise in the price level is inevitable, The impact on price levels is already sub- stantial, and complaints over the steadily rising cost of liv- ing can be expected to multiply. Effective government action to counter this inflationary threat is unlikely. There are serious political and adminis-' trative obstacles to instituting adequate controls over the do- mestic economy, and Spain's bal- ance-of-payments difficulties cannot be alleviated--as can its neighbors'--by the automatic credit extension which the Euro- pean Payments Union provides its members, The $30,000,000 of rationing to reinforce price controls, or of resorting to indirect monetary and fiscal controls to reduce demand. The The possibilities of in- creasing supply to control in- flation are limited by Spain's precarious trade balance, The government has failed to facili- tate the flow of foreign exchange by creating a favorable climate for private foreign investment, which continues to face exten- sive restrictions on foreign ownership of industrial and commercial enterprises in Spain and on the transfer of earnings abroad, Adequately enforced con- trol measures, particularly if attended by steps to revamp the nation's tax system in order to provide more revenue, would be opposed by the propertied classes, which are the backbone of the regime. Financial, land- additional defense support aid owning and industrial groups which Spain is requesting from would resent credit and price the United States would do little; controls, both as an immediate to solve its inflationary prob- threat to high profits and as lem. Steps taken thus far on.a national basis will probably be limited in their practical effects. On 9 November the cab- inet re-established a central price control board to fix food prices and issue directives to provincial and municipal author- ities. It also provided for an advisory board and a judicial agency to prosecute price con- trol violators. On 23 November the cabinet put clothing, house- hold goods, and construction materials under price control. The government, however, shows no sign of instituting a possible prelude to an eventual socialist state. In addition, any prospect of competition from foreign firms in Spain as a re- sult of the liberalization of restrictions on outside capital would play on the xenophobic fears of all these classes. Increasing Instability Foreign Minister Martin Artajo told the American embassy on 19 November that the price rise was periling Spain's eco- nomic stability. Failure of the government to take the strong steps required will probably,, in the absence of economic assistance from abroad, set off SECRET PART III PATTERNS AND PERSPECTIVES Page 9 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 27 December 1956 an inflationary spiral. In an effort to minimize its impact, the workers, remembering their partial successes of last April, might'be tempted to call nation- wide strikes for futher wage raises. The propertied classes, alarmed at the general deterio- ration of the economy, under such circumstances would tend to question the Franco regime's intensified, classes, might be tempted to replace the present regime with a more effective symbol of authority, particularly if the threat to public order were ability to serve their interests effectively, The American embassy has suggested that high-ranking military officers, who are mostly drawn from these SECRET PART III PATTERNS AND PERSPECTIVES Page 10 of 10 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 25X1 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9 Declassified in Part - Sanitized Copy Approved for Release 2012/05/30: CIA-RDP79-00927AO01100020001-9

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